[Congressional Record (Bound Edition), Volume 163 (2017), Part 11]
[House]
[Pages 15424-15427]
[From the U.S. Government Publishing Office, www.gpo.gov]




                 MUNICIPAL FINANCE SUPPORT ACT OF 2017

  Mr. HUIZENGA. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 1624) to require the appropriate Federal banking agencies to 
treat certain municipal obligations as level 2A liquid assets, and for 
other purposes, as amended.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                               H.R. 1624

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Municipal Finance Support 
     Act of 2017''.

     SEC. 2. TREATMENT OF CERTAIN MUNICIPAL OBLIGATIONS.

       (a) In General.--Section 18 of the Federal Deposit 
     Insurance Act (12 U.S.C. 1828) is amended--
       (1) by moving subsection (z) so that it appears after 
     subsection (y); and
       (2) by adding at the end the following:
       ``(aa) Treatment of Certain Municipal Obligations.--
       ``(1) In general.--For purposes of the final rule titled 
     `Liquidity Coverage Ratio: Liquidity Risk Measurement 
     Standards; Final Rule' (79

[[Page 15425]]

     Fed. Reg. 61439; published October 10, 2014) (the `Final 
     Rule') and any other regulation which incorporates a 
     definition of the term `high-quality liquid asset', the 
     appropriate Federal banking agencies shall treat a municipal 
     obligation that is both liquid and readily marketable (as 
     defined in the Final Rule) and investment grade as of the 
     calculation date as a high-quality liquid asset that is no 
     lower than a level 2B liquid asset.
       ``(2) Definitions.--For purposes of this subsection:
       ``(A) Investment grade.--With respect to an obligation, the 
     term `investment grade' has the meaning given that term under 
     part 1 of title 12, Code of Federal Regulations.
       ``(B) Municipal obligation.--The term `municipal 
     obligation' means an obligation of a State or any political 
     subdivision thereof, or any agency or instrumentality of a 
     State or any political subdivision thereof.''.
       (b) Amendment to Liquidity Coverage Ratio Regulations.--Not 
     later than the end of the 3-month period beginning on the 
     date of the enactment of this Act, the Federal Deposit 
     Insurance Corporation, the Board of Governors of the Federal 
     Reserve System, and the Comptroller of the Currency shall 
     amend the final rule titled ``Liquidity Coverage Ratio: 
     Liquidity Risk Measurement Standards; Final Rule'' (79 Fed. 
     Reg. 61439; published October 10, 2014) to implement the 
     amendments made by this Act.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Michigan (Mr. Huizenga) and the gentlewoman from California (Ms. Maxine 
Waters) each will control 20 minutes.
  The Chair recognizes the gentleman from Michigan.


                             General Leave

  Mr. HUIZENGA. Mr. Speaker, I ask unanimous consent that all Members 
have 5 legislative days to revise and extend their remarks and to 
include extraneous material on this bill.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Michigan?
  There was no objection.
  Mr. HUIZENGA. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I rise today in support of much-needed legislation that 
would simply fix a 2014 rule by financial regulators and allow 
municipal bonds to be considered as level 2B liquid assets, at a 
minimum, for purposes of calculating total high-quality liquid assets, 
or HQLAs, under the liquidity coverage ratio. The Municipal Finance 
Support Act is a bipartisan piece of legislation that passed 
unanimously out of committee, showing its clear need.
  Municipal securities are frequently issued by the transportation, 
housing, and healthcare authorities of State and local governments to 
raise funds to pay for projects ranging from bridges and schools to 
hospitals and recreational facilities. Excluding municipal securities 
from treatment as HQLAs will result in higher borrowing costs for State 
and local governments during times of economic stress.
  Furthermore, there is no reason why high-quality liquid bonds issued 
by the United States and municipalities should receive a lower standing 
than foreign sovereign debt with equivalent or, frankly, even lesser 
credit quality and market liquidity.
  Finally, disincentivizing financial institutions from holding 
investment-grade municipal securities could cause banks to retreat from 
the $3.8 trillion market, thereby forcing State and local governments 
to scale back pending projects on roads, schools, and other 
infrastructure projects financed with the bonds. Classifying 
investment-grade municipal securities as HQLAs will ensure low-cost 
infrastructure financing remains available for State and local 
governments.
  Although the Federal Reserve has issued an amended rule allowing 
municipal bonds to count as HQLAs for some banks, neither the OCC nor 
the FDIC have acted to follow the Fed's lead in amending their HQLA 
definitions to include these municipal securities. Their inaction 
creates a split regulatory system in which the treatment of municipal 
securities for the purpose of measuring the liquidity of the bank's 
holdings depends entirely upon who the regulator is.
  Mr. Speaker, I urge my colleagues to support this bill, and I reserve 
the balance of my time.
  Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such 
time as I may consume.
  Mr. Speaker, H.R. 1624, offered by Mr. Messer and Mrs. Maloney, 
represents a bipartisan effort to ensure that certain financial 
institutions will continue to hold municipal securities, while also 
supporting the spirit of an important bank guardrail in the Dodd-Frank 
Wall Street Reform and Consumer Protection Act.
  Bank regulators promulgated the liquidity coverage rule to ensure 
that megabanks have a minimum number of assets that they could sell, 
even in the worst markets. The rule permits banks to count assets like 
Treasury securities, GSE debt, and investment-grade corporate 
securities towards the pool. Regulators found that these securities 
could be sold even in stressed environments, thereby allowing a 
megabank to weather the storm of an economic crisis. This rule, known 
as the liquidity coverage rule, is an important tool for banking 
regulators to guard against the type of contagion we saw during the 
financial crisis.
  However, the bank regulators excluded all municipal securities 
because they concluded that municipal securities, as a class, are 
difficult to sell in stressed markets. This may be generally true, but 
the investment-grade debt of my State of California has lots of buyers 
and sellers and has a liquidity profile similar to many corporate 
securities. So it makes sense that, if there are municipal securities 
like California's debt that meet the same eligibility standards as 
other corporate securities, they should also be counted toward a bank's 
liquid assets under the rule.
  The Federal Reserve quickly recognized this problem and has since 
adopted a correction to permit bank holding companies under its 
jurisdiction to treat municipal securities that are liquid, market 
ready, and investment grade the same as similar corporate securities.
  This bill, as amended, takes the relief adopted by the Federal 
Reserve and extends it to banks regulated by the Office of the 
Comptroller of the Currency and the Federal Deposit Insurance 
Corporation. It isn't clear to me just how many municipalities will 
benefit from this legislation, and I imagine most would not, but even 
if only a handful of our States and cities qualify, the bill is worth 
passing because it could help to reduce financing costs for those 
governments.
  Mr. Speaker, I appreciate Mrs. Maloney's hard work and bipartisan 
efforts on this bill, and I reserve the balance of my time.
  Mr. HUIZENGA. Mr. Speaker, I yield 5 minutes to the gentleman from 
Indiana (Mr. Messer), the sponsor of this legislation.
  Mr. MESSER. Mr. Speaker, I want to thank my coauthor on this bill, 
Congresswoman Maloney, for her great leadership on this legislation, as 
well as Chairman Huizenga, Chairman Hensarling, Ranking Member Waters, 
and the entire Financial Services Committee team for their hard work on 
this important legislation.
  Mr. Speaker, it is a rare occasion in Washington when Republicans and 
Democrats can come together and get behind a change to the banking 
regulations, but we stand here today behind H.R. 1624 because the 
banking regulators, frankly, well, they messed it up. They created a 
rule that gives foreign municipalities a competitive advantage over our 
American cities and towns, and this advantage is hurting our 
communities.
  Mr. Speaker, this legislation is really quite simple. It will help 
cities and towns in my State and across the United States save money on 
roads and bridges and schools. President Trump has made rebuilding our 
infrastructure a priority for our Nation, and this bipartisan bill 
paves the way for this type of investment by lowering the price tag for 
roads and bridges.
  H.R. 1624 reverses a backwards banking regulation that makes it more 
expensive for U.S. municipalities to finance infrastructure projects. 
Specifically, the bill will amend the regulation to enable more banks 
to hold municipal bonds to cover their liquidity requirements. This 
change should reduce the cost of borrowing for cities and towns across 
the country. Ultimately, this bill helps taxpayers by making it cheaper 
to finance infrastructure projects.

[[Page 15426]]

  H.R. 1624 will help blue States and red States alike, and that is why 
you have seen such overwhelming bipartisan support for this in the 
Halls of Congress. The bill passed the Financial Services Committee 
unanimously this summer, and very similar legislation passed the 
Chamber by a voice vote last year.

                              {time}  1515

  Still we have got more work to do, and there is now momentum in the 
Senate to get H.R. 1624 across the finish line.
  The bill is also supported by numerous outside advocacy groups, 
including the National Governors Association, the Government Finance 
Officers Association, the National League of Cities, the National 
Association of State Treasurers, the U.S. Conference of Mayors, and 
even the State treasurer from my home State of Indiana, my good friend, 
Kelly Mitchell.
  Mr. Speaker, today we take the first step in this process in the 
House toward reversing this backwards regulation, and I urge all my 
colleagues to support this bipartisan bill.
  Ms. MAXINE WATERS of California. Mr. Speaker, I yield myself such 
time as I may consume, and I thank Mr. Messer for his leadership on 
this legislation.
  He is absolutely correct. He worked very closely with Mrs. Maloney. 
This is a bipartisan bill. He correctly stated that we do sometimes get 
together and work on issues in ways that we can be helpful, not only to 
our constituents in general but to cities and towns. We have talked an 
awful lot about wanting to improve our infrastructures, and this is one 
way that it certainly can be done.
  I would like to point out again the Federal Reserve's role in this 
because of the way that they recognized the problem and what they did 
to adopt a correction to the problem. So this bill again, as amended, 
takes the relief adopted by the Federal Reserve.
  Again, this is a case where we had Members who understood this 
problem, moved forward on it, and recognized that the Federal Reserve 
also recognized the problem. When you have several entities who have 
recognized a problem, it certainly makes good sense and good public 
policy for everybody to come together to correct it. So with the 
Federal Reserve having come forward and adopting this relief, it means 
that it is extended to banks regulated by the Office of the Comptroller 
of the Currency and the Federal Deposit Insurance Corporation.
  Again, I wish I could say that every city in the United States would 
benefit from it, but not all will. Not all need it. But for those who 
do, I think it is important for us to recognize that when we have the 
opportunity to come together and to help any part of our country, and 
when it is very easy to do so, I think we should do it. So I am very 
pleased that we have been able to do that.
  Mr. Speaker, I yield such time as she may consume to the gentlewoman 
from New York (Mrs. Carolyn B. Maloney), who is the lead Democratic 
cosponsor of this bill.
  Mrs. CAROLYN B. MALONEY of New York. Mr. Speaker, I thank the ranking 
member for yielding and for her leadership on this issue and so many 
others.
  I strongly support the bill, and I would like to thank my good friend 
from Indiana (Mr. Messer) for his leadership.
  We introduced this bill in order to level the playing field for our 
cities and States by requiring the banking regulators to treat certain 
municipal bonds as liquid assets, just like corporate bonds, stocks, 
and other assets.
  As a former member of the city council in New York, I know firsthand 
the importance of municipal bonds. They allow States and cities to 
finance infrastructure, build schools, pave roads, and build subways. 
They are all financed with municipal bonds.
  Unfortunately, in the banking regulators' liquidity rule--which 
requires banks to hold a minimum amount of liquid assets--they chose to 
allow corporate bonds to qualify as liquid assets, but completely 
excluded municipal bonds--even municipal bonds that are just as liquid 
and high-grade as corporate bonds.
  This makes no sense, and it effectively discriminates against 
municipal bonds and cities. A municipal bond that is just as liquid as 
the most liquid corporate bond would not be counted as a liquid asset 
under the rule just because it was issued by a municipality rather than 
a corporation.
  The Fed has already recognized this error and has amended its rule to 
fix the problem. But the OCC, which regulates national banks, is still 
refusing to amend its rule and insists on favoring corporations over 
municipalities. So Mr. Messer and I introduced this bill because this 
kind of arbitrary discrimination against municipalities cannot be 
allowed to continue.
  So in sum, this bill levels the playing field for cities and States 
in a way that maintains the safety and soundness of our banking system. 
The bill passed the Financial Services Committee 60-0 in July, and last 
Congress the bill passed the full House by a voice vote.
  So I urge my colleagues to, once again, support this bipartisan 
legislation which is critically important for our States and our 
cities.
  Ms. MAXINE WATERS of California. Mr. Speaker, I yield back the 
balance of my time.
  Mr. HUIZENGA. Mr. Speaker, I rise in support of H.R. 1624. I commend 
my ranking member from the Subcommittee on Capital Markets, Securities, 
and Investments, Mrs. Maloney, as well as the work from my colleague 
from Indiana.
  This is a commonsense, no-nonsense, bipartisan solution to a mistake 
that was made by regulators. We need to grant clarity and harmony to 
those who are borrowing those dollars, those municipalities, States, 
and cities, as well as the investors and those who hold these bonds.
  Mr. Speaker, I appreciate the opportunity to be here. I am pleased 
that we can support H.R. 1624, and I yield back the balance of my time.
  Mr. GONZALEZ of Texas. Mr. Speaker, this bill requires federal 
banking regulators to define municipal obligations as liquid, readily 
marketable and investment grade.
  Defining municipal securities in this way will allow financial 
institutions greater flexibility to manage their liquidity requirements 
and use their capital resources more impactfully and effectively. In 
short, this bill goes a long way to strengthen the liquidity risk 
management of banks, savings associations, and bank holding companies.
  This bill does all this by redefining what qualifies as ``High 
Quality Liquid Assets''. Currently HQLAs are defined as U.S. 
Treasuries, Government Debt, Investment Grade Corporate Debt, and 
Excess Reserves held by the Fed. Notably absent from that list are 
Municipal Securities.
  Better public policy calls for such securities to be redefined as 
HQLAs. This is important, because Municipal Securities are issued for 
vital purposes such as transportation projects, housing developments, 
healthcare and recreational facilities, as well as bridges, schools and 
hospitals.
  The current exclusion of Municipal securities from the HQLA 
definition reduces the eligible pool of potential purchasers of 
municipal issuances. This results in increased borrowing costs for our 
state and local governments, especially during times of economic 
stress. Simply put, high quality liquid municipal bonds (issued by U.S. 
states and local governments) should not be viewed as inferior to that 
of foreign sovereign debt. In fact, our domestic municipal issuances 
often have superior credit quality and market liquidity than do many 
foreign issuances.
  The exclusion also discourages banks and other financial institutions 
from holding investment grade municipal securities and is causing many 
bank holding companies and national banks to retreat from investing in 
such securities, thereby forcing state and local governments to scale 
back spending on roads, schools, and other infrastructure projects.
  Various former governors of the Federal Reserve have already 
suggested that some local and state debt is comparable to that of very 
liquid corporate bonds. Chairman Yellen herself has frequently declared 
her support of the expanded treatment of municipal securities as HQLAs.
  According to the American Society of Civil Engineers, our states and 
local governments expect to confront an infrastructure spending gap of 
over $2 trillion dollars over the next 10 years. Let's pass this bill 
now so that the American people get the country they deserve.

[[Page 15427]]

  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from Michigan (Mr. Huizenga) that the House suspend the rules 
and pass the bill, H.R. 1624, as amended.
  The question was taken; and (two-thirds being in the affirmative) the 
rules were suspended and the bill, as amended, was passed.
  The title of the bill was amended so as to read: ``A bill to require 
the appropriate Federal banking agencies to treat certain municipal 
obligations as no lower than level 2B liquid assets, and for other 
purposes.''.
  A motion to reconsider was laid on the table.

                          ____________________